We talk about this all the time: the media has a powerful influence on its audience, and more times than not, what they choose to report on does not line up with what matters most. This disconnect can pose real risk to investors. The chart below is from an article that compares the difference between causes of [...]
On its face the strategy of “buying the dip” seems much more measured than merely trying to identify low-cost stocks that are destined to become the next Apple. But it’s still a risky strategy. Just like it sounds, to buy the dip is to purchase stocks that are temporarily undervalued. For example, Pitney Bowes, Paypal, [...]
If the stock market were a person, you would not want to be around them very much. Imagine a friend who reacts unpredictably to every major piece of economic news, often several times a day. One minute they’re on top of the world. The next minute they’re sitting in a dark corner with their head [...]
Pictures help us make sense of data. For example, when paleontologists unearth a single tooth, they can tell a lot about the animal it came from, including whether or not it’s a new species. When they publish their findings for their peers, they will include pages and pages of data. But when the discovery is [...]
One of the favorite tropes of time travel stories—movies, novels, or TV shows—is the prescient investor. This is a character who becomes fabulously wealthy by traveling to the past and buying high performing stocks before they take off. It’s a handy way to create a character with limitless resources, but it also fulfills the fantasy [...]
We have a friend who’s a devoted fan of his university’s football team. When he watches them play, he wears a team hat and hopes they win. When they lose, he puts the outcome in perspective. There’s always next week. It’s only a game. But he didn’t used to be this philosophical. Several years back [...]
It’s not controversial to say that investing biases can hurt the performance of your portfolio. Most investors would agree. And yet by its very nature a bias—an unreasoned opinion—will often be invisible to the person holding it. You can find evidence of this in a recent DALBAR, Inc. study of investor behavior. Researchers found that [...]
One of the oldest tricks in the arsenal of the professional card shark is to let the “mark” win. It might be just a few hands or it might be a series of games over weeks. Whatever it takes to make the victim think he’s on a hot streak. And whether he thinks it’s due [...]
The words “speculating” and “investing” often get used interchangeably. And that’s not surprising, since they describe somewhat similar concepts. In both cases, you are laying out money with the hope of gaining a return in the future. And to muddy the waters further, marketers are prone to use the words to either cast aspersions on [...]
Halloween, as comedian Jerry Seinfeld pointed out, is the best possible holiday a child can imagine. You simply go door-to-door and the neighbors give you handfuls of candy for free. But according to Kerry McDonald, trick-or-treating and the extensive trading of candy afterwards illustrate several important principles of a free market. The very concepts that [...]